Top 5 Tips for Irish Start Up Businesses
Starting a new business is tough. Here are 5 pieces of advice to make sure you get off to a winning start.
1. Know Your Market
Know your market and potential customer base before you start trading. A business stands a better chance of surviving if a business plan is prepared in advance of trade commencing. The business plan normally contains details of market research carried out by the business owners, detail of the product or service to be traded, the potential customer base, the cost of producing the product or service, the anticipated overhead costs, profit margin, sales price, anticipated sales volume and value for the first two years trading, details of how the business will be financed with details any external finance required and a two year projected cash flow schedule. This business plan can be used when approaching a bank of granting organisation for a term loan or a grant. It is recommended to have a business plan prepared professionally by accountants rather that by the business owners as third parties such as banks or other financiers will not give much credit to a business plan which is presented unprofessionally and/or containing obvious errors. All start up business should consider preparing a business plan.
2. Decide on Sales Price
Decipher your sales price and consider your profit margin to ensure your product/service sales will be optimized. If you price your product or service excessively you will price your business out of the market, no matter how good it is. Customers will always consider price of the product or service and will compare the price a competitor is charging for a similar product or service. This means that the price a business can charge will be dependent on market price and not on cost plus acceptable profit margin. This will be a deciding factor when a business, considering all costs of producing a product or service, must make the decision whether or not to trade in particular market conditions. The ability to produce a product or service at a competitive price and earn an acceptable profit is something that all start up businesses should strive to achieve.
3. Ensure Business is Adequately Financed
Ensure that the business is adequately financed to trade in its first / second year until it reaches optimal profitability and becomes self financing. The lack of adequate financing of a start up business will inevitably lead to its downfall. A start up business generally requires about two years from commencing trading before it becomes self financing. Start up costs such as advertising, promoting the new business and the cost of creating a business website can be quite extensive and of a once off nature. These costs need to be financed, because, on the one hand, the lack of finance will mean that he business trading cash flows are eaten up by these costs and lead the business into insolvency, and on the other hand if these expenses are not incurred, in an effort to preserve trading cash flow, the business will not get off the ground because it will not have been promoted or advertised and will be virtually unheard of.
4. Consider Overheads
Continually consider your overhead costs to ensure that losses are not occurring due to excessive unnecessary spending. Overhead costs can be overlooked and may be seen as absolutely necessary and unavoidable. These costs will normally include the rent and rates of the business premises, advertising, phone & stationery costs and the business owner’s salaries. Tight budgets must be prepared annually and strictly adhered to. Market forces will be a major factor in the preparation of annual budgets and if current and anticipated future market conditions are not correctly built into such budgets they will prove to be of little use to the business.
5. Listen to Your Customers
Observe your customers comments and requirements at all times because without them your business will not survive. A businesses success depends on its customers, not vice versa. Therefore the customer’s opinion is always of great important to a start up business. If a customer states a preference to a business and if this request is ignored by the business the customer will talk with their feet and simply go elsewhere to purchase the product or service. All too often a business will consider the comments or requests of a customer to be criticism rather that constructive suggestion, much to the detriment of the business. The direction and indeed the profitability of a start up business is greatly dependant on the views of its customers and this fact should be recognised by business owners.
For more information on how we can help you with your business venture please see our Business Start Up Advice Service.